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Happy Tuesday! PfizerPerhaps our problems have finally come to a head.
Former executives of the pharmaceutical giant are backing activist investor Starboard Value's campaign to turn around the struggling company, according to recent reports.
Starboard owns nearly $1 billion in shares of the drugmaker, and has reached out to former Pfizer CEO Ian Read and former CFO Frank D'Amelio, both of whom have expressed interest in supporting the activist investor's efforts to turn around the company, CNBC previously reported. As of late Tuesday, Pfizer's market value was about $165 billion.
Reed and D'Amelio conveyed proposals from Starboard to several members of the company's board on Sunday, the Financial Times reported Monday, citing sources familiar with the talks. However, details of the transformation plan are scant.
Reed served as Pfizer's CEO from 2010 to 2018, while D'Amelio was Pfizer's CFO from 2007 to 2021.
Here's why it matters: Reed and D'Amelio's reported involvement is a rare example of former executives engaged in what could be an active fight for the future of one of the world's largest pharmaceutical companies.
Investors are demanding change at Pfizer, whose shares have fallen more than 30% over the past two years. The company has struggled to recover from the rapid decline of its coronavirus-related business, which generated record revenues during the height of the pandemic.
Pfizer CEO Albert Bourla is facing mounting pressure to improve the company's performance after several business missteps over the past two years — including disappointing data on an experimental obesity pill and a slower-than-expected rollout of its respiratory syncytial virus vaccine — coupled with a costly vaccine. A merger and acquisition strategy that has not yet yielded significant returns.
Pfizer is betting big on oncology, particularly its massive $43 billion acquisition of cancer drug developer Seagen, to regain its footing. But this deal may take years to come to fruition. Meanwhile, Pfizer last month pulled a key sickle cell drug from global markets — the centerpiece of its nearly $5 billion acquisition of Global Blood Therapeutics in 2022.
Starboard's transformation efforts raise questions about Burla's fate at the company.
“We have felt investor frustration with CEO Albert Bourla since at least the beginning of 2023,” BMO Capital Markets analyst Evan Segerman wrote in a research note on Monday.
However, he said, “Although blaming one person may seem easy, it rarely leads to quick change.”
Likewise, other analysts said there may not be a quick fix by an activist investor.
“We await future developments, but do not see the fruits of enhanced shareholder value in sight,” David Reisinger, an analyst at Leerink Partners, wrote in a research note on Monday.
That's because the company faces “constrained revenue growth” over the next five years, driven by patent expirations on its best-selling drugs and pressure from competitors, Reisinger said. He added that Pfizer has also made significant efforts to cut costs. The company announced last fall that it would cut costs by $4 billion, and in May it unveiled another multi-year plan to cut expenses by about $1.5 billion by 2027.
Pfizer's debt levels are also relatively high, with debt standing at $57.5 billion as of June 30, Reinger noted. This can only be partly reduced by selling more shares of its assets, such as consumer health company Haleon, he said.
We'll continue to follow Starboard's transformation, so stay tuned to our coverage.
Feel free to send any tips, suggestions, story ideas and data to Annika at annikakim.constantino@nbcuni.com.
The latest in healthcare technology: Hims & Hers joins S&P SmallCap 600 as questions grow about future of weight loss offerings
shares Himes and hers healthThe direct-to-consumer healthcare company closed up 10% on Monday after announcing the stock had been added to the S&P SmallCap 600.
S&P Dow Jones Indices said Hims & Hers will replace Vector Group before the opening bell on Oct. 9, according to a statement on Friday. Japan Tobacco completed its acquisition of Victor Group, which operates tobacco and real estate businesses, on Monday.
Hims & Hers offers treatments for weight loss, sexual health, hair loss and other conditions, and the stock is up nearly 120% year to date as of Monday's close. However, the company's shares fell last week after the US Food and Drug Administration announced that tirzepatide injections were no longer available.
Tirzepatide is the active ingredient in Eli Lilly's GLP-1 weight-loss drug Zepbound and diabetes drug Mounjaro. Hims & Hers does not offer these drugs through its platform, but CEO Andrew Dudum told investors in August that the company is looking to offer access to combination versions in the near future, as well as branded versions when offering is permitted.
Compounded drugs are specially made alternatives to branded drugs, and can be produced when branded treatments are in short supply. Hims & Hers offers customers combination versions of semaglutide, the active ingredient in Novo Nordisk's GLP-1s called Wegovy and Ozempic.
“We do not provide access to tirzepatide at this time,” a Hims & Hers spokesperson told CNBC in a statement Monday. “When we offer a treatment on our platform, our first consideration is how accessible it is to the vast majority of clients and the accessible methods are consistently available at a reasonable price.”
Hims & Hers is one of several digital health companies selling GLP-1 combination drugs as a cheaper alternative to consumers while demand for weight loss and diabetes drugs soars. But it's not a surefire way to carve out a share of the anti-obesity drug market, which some analysts estimate could generate $100 billion in annual revenue by 2030.
Both Zepbound and Mounjaro are under patent protection in the United States, and Eli Lilly does not supply the active ingredient for these drugs to outside groups. The FDA warned last week that outsourcing facilities are generally prohibited from formulating copies of an approved drug unless it is on a shortage list.
“When a drug shortage is resolved, the FDA generally considers a drug to be commercially available,” the agency said on its website. “There are certain amounts permitted by law as long as the aggravation does not occur ‘regularly or in excessive amounts’.”
Although Hims & Hers does not offer the combination drug tirzepatide, the FDA announcement was enough to spook investors. Hims & Hers shares closed down nearly 10% on Thursday.
Analysts at Citi said Hims & Hers would not be directly affected by the tirzepatide news, but it limits the company's total addressable market. This also indicates that the shortage could be resolved faster than expected, they added.
“HIMS has confirmed that it will be able to continue formulating GLP-1 after the shortage subsides by changing the form factor/formulation/dose to achieve clinical benefit to the individual,” the analysts wrote in a note on Thursday. “In our view, this sets up HIMS for a legal battle in the coming months.”
Feel free to send any tips, suggestions, story ideas, and pitches to Ashley at ashley.capoot@nbcuni.com.
